Question

Drewana, Inc. obtained significant influence over Sterling Corporation by buying 25% of Sterling 50,000 outstanding shares...

Drewana, Inc. obtained significant influence over Sterling Corporation by buying 25% of Sterling 50,000 outstanding shares of common stock at a total cost of $7 per share on January 1, 2019. On June 16 Sterling declared and paid a cash dividend of $40,000. On December 31, Sterling reported net income of $90,000 for the year.

Instructions

Prepare all the necessary journal entries for 2019 for Drewana, Inc.

Business   Accounting   
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Answer #1
Date Account Titles and Explanation Debit Credit
Jan 1, 2019 Investment in Sterling Corp. Stock       87,500
Cash       87,500
(50,000 x 25% x $7)
June 16 Cash       10,000
Investment in Sterling Corp. Stock       10,000
($40,000 x 25%)
Dec 31 Investment in Sterling Corp. Stock       22,500
Revenue from Investment       22,500
($90,000 x 25%)
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